Caterpillar to offer $885 million for China’s ERA Mining

PEORIA, Ill. ― Caterpillar Inc. said it will make an offer to buy China’s ERA Mining Machinery Ltd. to strengthen its mining business and ramp up investment in the fast-growing country, in a dual-option deal that could be worth up to $885 million.

Shares in ERA, which makes underground coal mining equipment, rose 21.2 percent to HK$0.8 on Friday.

“Coal consumption in China is growing faster than anywhere else in the world,” Caterpillar Group President Steven Wunning told Reuters in a telephone interview on Friday. Wunning said that China already consumes nearly half of the world’s coal, creating a huge market for underground mining of the resource.

Caterpillar will either pay HK$0.88 cash per share, and/or offer a loan note alternative, which will entitle ERA’s loan note holders to receive a minimum of HK$0.75 and up to HK$1.15 per loan note upon redemption.

The offer values Hong Kong-listed ERA at HK$4.490 billion-$6.885 billion ($577.25 million-$885.15 million), Caterpillar said in a statement.

Caterpillar, the world’s largest heavy machinery manufacturer, said its offer will be made if clearance from China’s Ministry of Commerce and any other related bodies is obtained.